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Over $13 Billion Lost by Leverage Crypto Traders in 2020

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Cryptocurrency Traders Lost $13 Billion in 2020

Data presented by cryptocurrency trading simulator Crypto Parrot indicates that leverage cryptocurrency traders on Bitfinex and BitMEX exchanges have cumulatively lost $13.47 billion in 2020.

A total of $9.26 billion worth of long positions and $4.21 billion worth of short positions have been liquidated over tha last 360 days. BitMEX has liquidated roughly $7.7 billion longs and $3.83 billion shorts. In comparison to Bitfinex with $1.55 billion longs and $374.55 million shorts liquidated.

Back swan event triggers liquidation

The high liquidation value is mainly due to the Bitcoin price movement that has impacted the rest of the crypto market. The asset has witnessed key price movement across the year. The Crypto Parrot research states that:

“The March decline in Bitcoin price was unexpected as it came in the wake of a black swan event. The asset’s value simultaneously plunged alongside stocks, gold, silver, and other legacy markets. However, gold, stocks, and Bitcoin recovered after central banks rolled out pandemic stimulus packages. With Bitcoin, it is premature to expect a similar movement from a black swan event.”

The liquidated amount is significant and traders have attempted to avoid using excessive leverage when trading futures contracts. Therefore, the majority of traders rely on insurance funds.

Leverage trading or margin trading refers to a method of trading assets using third party funds. Margin accounts allow traders to access large sums of capital, allowing them to leverage their positions. Overall, margin trading amplifies trading outcomes so that traders can realize larger profits on successful trades. This strategy carries more significant risk compared to trading on a regular spot exchange.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Cryptocurrency

Bank CEO Calls for Increased AML & Compliance Initiatives to Counter Funding of Terrorism in Crypto

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Last month, the Kenya Bankers Association had their regular CEO Chat, this time with Alakh Kohli, CEO of M Oriental Bank. He noted that, without further regulatory guidance from government agencies, his bank didn’t plan to increase access to digital currency services.

In particular, he addressed the need to have a more uniform industry standard to deal with countering bad actors intent on utilizing cryptocurrency as a method to launder money and fund terrorist operations.

“For years, I’ve been talking about the need to crackdown on the nefarious activity which resides in the cryptocurrency community. Iran has notably aimed to utilize blockchain technologies to avoid international sanctions. And exchange operators utilize different thresholds of security to prevent money laundering. It is in the best interest of the industry’s long-term longevity that we come together with government agencies to root out the bad actors and end their chicanery,” opined Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

In the interview, Kohli noted that “at the moment we have no plans on rolling out any digital currency services in the absence of a regulatory framework. This is an evolving space, once the right frameworks are in place to address the risks, including Anti Money Laundering and Countering the Financing of Terrorism and underlying asset concerns for it to be a store of value; I’m sure there will be offerings coming to the market. What is more exciting is the blockchain technology which digital currencies are based on is already being adopted by banks for enhancing and offering new and disruptive product innovations.”

“It isn’t just his bank. Many institutions are waiting for guidance from the jurisdiction in which they operate. We need a clear set of rules. A set of rules that sets a bar for exchange operators to measure themselves against. Responding to the lack of regulatory guidance, we’ve been advising clients to self-regulate and integrate all the AML & KYC security enhancements available before any mandates are in place. It is better to be ahead of the curve than to simply be responsive,” noted Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago. Earlier this year, Modulus  filed for a patent on its Exchange Trust Score System, a revolutionary solution which aims to restore trust in financial exchanges, particularly those dealing in digital assets and cryptocurrencies, and giving regulators an additional tool by which to gauge the integrity of an exchange.

“On the one hand, exchanges need a framework to operate safely. On the other hand, investors need to know which exchanges they can trust. None of the features in the world matter if your exchange isn’t safe. We’ve been focusing on exchange security for the past two decades. Even after building an exchange that approached the laws of physics in terms of transaction speed, that wasn’t enough. Those features are only as good as the security behind them. It is time that the government brings industry insiders to the table to discuss a commonsense set of regulations which will keep the public safe and foster even greater innovation in the industry,” Gardner said.

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Central American Bank for Economic Integration Supports El Salvador’s Bitcoin Law

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The Central American Bank for Economic Integration (CABEI), which has 15 member countries, will help El Salvador implement bitcoin as legal tender.

The CABEI president has expressed his support. “We’re very optimistic,” he said.

The head of the Central American Bank for Economic Integration (CABEI) expressed his support for El Salvador’s bitcoin law Monday. CABEI Executive President Dante Mossi said that the bank will give El Salvador technical assistance to implement bitcoin as legal tender.

Last week, El Salvador became the first country in the world to pass a law making cryptocurrency legal tender.

The CABEI has 15 member countries: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Dominican Republic, Belize, Mexico, Republic of China (Taiwan), Argentina, Colombia, Spain, Cuba, and Korea. The bank’s objective is to “promote the economic integration and the balanced economic and social development of the Central American region,” its website details.

Mossi said his organization will work with El Salvador’s finance ministry and central bank to select a team to work on the implementation, Reuters reported.

Mossi believes that the move to make bitcoin legal tender would offer many benefits to people in El Salvador. For example, it would lower the cost of remittances for relatives of Salvadorans living abroad, he explained.

The CABEI executive president also called on El Salvador’s government to develop a regulatory framework for bitcoin in order to prevent “bad actors” from taking advantage of the system’s anonymity, the publication conveyed.

Following El Salvador’s move to make bitcoin legal tender, lawmakers in a number of Latin American countries have expressed their interest in bitcoin.

The countries include Paraguay, Argentina, Panama, Brazil, and Mexico. Moreover, Tonga and Tanzania have also reportedly expressed interest in bitcoin.

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Cryptocurrency

SEC Leaves Bitcoin and Cryptocurrency Off 2021 Regulatory Agenda

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The U.S. Securities and Exchange Commission (SEC) has released its regulatory agenda which does not mention bitcoin or cryptocurrency regulation.

The Office of Information and Regulatory Affairs released the Biden administration’s Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions last week.

It details “the actions administrative agencies plan to issue in the near and long term,” which provides “important public notice and transparency about proposed regulatory and deregulatory actions within the Executive Branch,” the accompanying announcement explains.

Included in the agenda is the U.S. Securities and Exchange Commission (SEC)’s “annual regulatory agenda,” the agency independently announced, clarifying:

“The report, which includes contributions related to the Securities and Exchange Commission, lists short- and long-term regulatory actions that administrative agencies plan to take.”

Some of the items the SEC will consider include disclosures relating to climate risk, corporate board diversity, and beneficial ownership and swaps. The SEC will also focus on rules relating to SPACs and short sale disclosure reform. The full list can be found here.

SEC Chairman Gary Gensler commented: “To meet our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us.

“I look forward to collaborating with my fellow commissioners and the dedicated staff to propose and finalize rules that will strengthen our markets, increase transparency, and safeguard investors.”

While bitcoin and cryptocurrency are not on the SEC’s regulatory agenda this year, Gensler has been talking about the need to protect investors and regulate cryptocurrency exchanges.

Last month, the chairman urged Congress to pass cryptocurrency legislation to protect investors, adding that cryptocurrency exchanges needed more regulation. In addition, the SEC cautioned investors about funds trading in bitcoin futures last week.

So far, the agency has brought 75 crypto-related enforcement actions. Meanwhile, a growing number of companies are seeking approval to trade bitcoin exchange-traded funds (ETFs).

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